Factors affecting tax compliance in Small and Medium Enterprises in Mombasa Central Business District
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Date
2018
Authors
Ngeno, Sharon
Journal Title
Journal ISSN
Volume Title
Publisher
KESRA/JKUAT - Unpublished research project
Abstract
Tax compliance is making payment and producing, declaration and submitting tax information to tax authority (KRA), in required format used to assess the level at which a tax payer follows, or adheres to the tax liability that he or she voluntarily or is expected by the tax laws to follow by filling return required by law and paying the taxes arising therein. The Small and medium enterprises In Kenya, forms a larger percentage of taxpayers, an approximation of 34.4% while also providing employment opportunities in the Kenyan market. This study intended on analyzing the factors affecting tax compliance by SME’s in the Mombasa County. Having three objectives: to assess the effect of the taxpayers’ attitude in Kenya on the tax compliance of SME’s in Mombasa; the effects of financial records on tax compliance, the effects of compliance cost and Taxpayers’ Psychological factors- moral values, taxpayers perception to fairness and equity in taxation- moral values, taxpayers perception to fairness and equity in taxation on tax compliance of SME’s. The research study employed three theories economic based theory, psychology theory and economic deterrence theory. A descriptive research design was adopted having a population of 200 SMEs and the sample size was 133 who are divided into three stratum. Data were collected by the use of a structured questionnaire and analyzed using inferential statistics. A regression model using statistical package for social science, the study found out that Financial Records have a strong influence on the compliance of the SMEs, the regression model obtained showed financial records affects tax compliance by 45.2%, and a strong correlation of coefficient r 0.812. The cost of compliance is strongly correlated to the Compliance given by the coefficient r 0.582, supported by the linear regression model obtained whereby; Compliance cost affects tax compliance by 34%. Taxpayers’ Psychological factors- moral values, taxpayers’ perception to fairness and equity in taxation affects tax compliance by 34.1%, a coefficient correlation of 0.808 showing a very strong correlation. The study recommends intensive tax education by KRA where real practical issues are used as illustrations on Financial Records importance, Simplification of tax compliance procedures by the authority to reduce the cost of compliance by the SMEs and Improvement in the equity and fairness in the payment of taxes through a unified and open tax system for the SMEs.
Description
REF PROJ 336.2 NGE
Keywords
Tax compliance, Psychological factors, Cost compliance